Most exciting are the low down payment, 97 percent loans
introduced by Fannie Mae and Freddie Mac in early 2015. We were
early adopters of both, and we’re starting to see buyers taking
advantage of them. Compared to FHA loans, these products have
tighter credit qualifications. They come with risk-based pricing for
borrowers with credit scores under 680, whereas the FHA serves
borrowers with scores as low as 580. But the Fannie and Freddie
products also come with lower costs, which helps on affordability.
That said, we’re still a big FHA lender. I know a lot of lenders have
backed away from the FHA, but we still do a good portion of our
business with the agency. [JPMorgan Chase, Wells Fargo, and
other banks in 2015 announced reductions in their FHA business
out of concern for the FHA’s requirement that lenders buy back
loans that don’t fit the agency standards.]

What process changes have you made, or will you make, to improve the consumer experience? One of the biggest changes we
made is to move our underwriting up front. We now do a complete
underwriting three or four days after the file has been submitted,
so our loans aren’t waiting 30 days to be underwritten. We’re
also engaging customers earlier in the process. We introduced
Home Insight® Tracker and we’re seeing great use of the tool
and customers are having a great experience. After customers
apply, they can follow the application through underwriting to the
closing process via the web. Also, Tracker is mobile-optimized,
so customers have access to their loan via any device and can
upload documents by taking a picture. It demystifies the process.
In addition, we also introduced a new tool—PNC AgentView®—that
allows agents to stay up-to-date and have a complete view of their
clients’ mortgage applications. Has the appraisal been approved?
Has the loan been approved? Is the loan ready to close? This provides a great team approach to helping home buyers achieve their
dream of home ownership.

This brings us to the new closing rules, what the Consumer Financial Protection Bureau calls “Know Before You Owe.” The
rules took effect last year, replacing the Good Faith Estimate
with a Loan Estimate and the HUD- 1 Settlement Form with a
Closing Disclosure. They established new time frames to give
borrowers more time to understand their loan terms before
they get to closing. What changes have you made to accommodate the requirements? We adapted our existing platform to
make sure we could deliver for our customers and partners. We’re
also in the process of installing a new loan origination system at
the beginning of next year. We contracted with a company called
Black Knight® Financial Services to be our front-end loan origination system provider. We’ll be configuring the system to leverage it
for PNC’s businesses. Old technologies are just not going to work
in this new environment. You have to make the process easy for
the customer and adaptable to regulatory changes.

In terms of loan products and borrowers, what’s PNC’s
sweet spot? Put another way, what is your company’s ideal
borrower and what is the ideal loan product for that person?

I can say with pride we’re one of the few national mortgage lenders whose strategy is to service all customers. PNC has portfolio
products focused not only on the jumbo affluent borrower but
also on the affordable market, with our PNC Community Mortgage, which is our own 97 percent loan-to-value product. And
we make sure we provide home ownership opportunities to all of
our banking communities. [ The Community Reinvestment Act
requires banks to make loan options available in all branch areas
in which they collect deposits.] We continue to offer FHA, Fannie
Mae, and Freddie Mac products for our customers. Ultimately,
we want to ensure we support our entire customer base: Our
customers are buyers of starter homes, move-up homes, and
luxury homes, as well as vacation and investment properties.

News reports say borrowers are finding it easier to qualify
for loans today than a few years ago, when standards were
considered overly tight. And yet, they are still considered
tight by many real estate professionals. Where are the
standards now, and where do you see them heading a
year from now? I don’t ever see a day when we’ll return to the
lending environment that we saw before the crisis. In fact, the
ability-to-repay provisions in the 2010 Dodd-Frank banking
reform law prohibit the kinds of things we saw, and that’s a good
thing. The lending community’s job isn’t just to help people
attain home ownership; it’s to help them sustain it. That said, I
don’t think standards are any looser than they were a couple of
years ago. I think we’re better at preparing the customer to understand affordability and the requirements to get a loan. If you
haven’t purchased or refinanced a home in the last five years or
so, it’s going to be a different process for you. The tighter guidelines are here to stay.

But are borrowers with credit that’s okay but not stellar
going to be able to get a loan in this environment of permanently tighter standards? Yes, they’re going to be able to get
a loan. There are products out there to help borrowers achieve
that goal. Are you going to see someone with a really low credit
score and a recent bankruptcy get a loan? Probably not. But
borrowers who are responsible with their credit and demonstrate the ability to repay are going to find options available to
them, by all means. They’re going to have the Fannie Mae and
Freddie Mac 97 percent products, our own affordable portfolio
product, and the FHA product. Each of the options comes with
different costs, characteristics, and advantages. Some will have
higher costs, some will have lower interest rates, some will have
better features, such as no mortgage insurance requirement,
but loans are available today that are affordable and flexible
enough to help customers qualify to buy a home.